SCOTTS VALLEY — The Scotts Valley City Council voted Wednesday to place a business license tax modernization measure on the city’s November ballot.

“The reason this was being considered was because the City Council has a goal of pursuing additional sources of revenue to support a thriving city,” Scotts Valley City Manager Mali LaGoe said at the meeting. “We have been very focused on the long-term financial stability of the city without reducing services to the community. A decade of deferred maintenance on streets, parks and facilities has made our financial situation challenging as well as labor market challenges to attract and retain staff.”

According to the meeting’s staff report“Like many California and Bay Area communities, the economic fallout from the COVID-19 pandemic has exacerbated the challenge of funding the City of Scotts Valley’s critical community services. Without increased revenue, deep budget cuts will be required beginning in fiscal year 2025-26. These reductions would further impair services prioritized by the community, including street repairs, park maintenance, wildfire preparedness and public safety.”

Lagoe said in the meeting that the city is projecting a $2 million annual budget shortfall, which the business license tax modernization measure could help address and that a number of other options were being explored.

“The city looked at a lot of different options and what can we do to address this budget deficit challenge,” Lagoe said. “In Scotts Valley, we are a low property tax city that only receives about 6.5% of the property taxes that our residents pay on an annual basis. Our sales tax was recently updated with Measure Z in 2020 and that has really helped spur all of the improvements that we have been able to do throughout the city and with our staff and our services.”

Lagoe mentioned that other strategies to increase city revenue were seriously considered, such as changing the tax on its utility users, but staff and the City Council ultimately decided to update the business license tax.

“It was last updated in 1992,” Lagoe said. “Companies have paid the same dollar amount for the past 32 years without cost of living or consumer price index increases, which over that 32-year period would have increased by 250%.”

If the measure is approved by voters this fall, the new rates would be implemented in a two-year phase, with 50% of the new rates on May 1, 2025 and 100% on May 1, 2026. The initiative would raise the base tax rate for business licenses from $90 to $150 per business and with tax rates which increases incrementally for larger companies based on gross revenue. The initiative is expected to raise $1.1 million for the city of Scotts Valley annually.

The ballot initiative states that the tax revenue is intended to maintain city services, such as repairing potholes and streets, wildfire prevention programs, maintaining parks and playgrounds, and other essential government services.

Originally published: August 10, 2024 at 4 p.m